CCI orders fresh probe against DLF; second in two days

The Competition Commission has ordered a fresh probe against realty major DLF, finding the company to have prima-facie abused its dominant position, making it the second such probe ordered within two days.

The new order, in which the CCI has asked its investigative arm to conduct a detailed probe, relates to alleged "abuse of dominant position in development and sale of residential units in Gurgaon" for the Skycourt residential project of DLF Universal Ltd.

This follows another probe ordered by the CCI yesterday for probe into similar complaints related to the 'Regal Gardens at DLF Garden City' project in Gurgaon.

With regard to a few other projects, all of which have been incidentally been in Gurgaon, the CCI has already found DLF guilty of having abused its dominant market position. In one such case, the CCI had imposed a penalty of Rs 630 crore on DLF in August 2011.

The company challenged that order before the Competition Appellate Tribunal, which upheld the penalty, pursuant to which DLF has gone to the Supreme Court.

In the latest order, dated February 5 and released today, the CCI said, "At the outset it may be noted that the Commission has already received many informations where Opposite Party (DLF Universal) has been prima facie found to be dominant in market for 'provision of services for development of residential apartments in the territory of Gurgaon'.

"The issues raised in this case are also of the same nature where the Informant (an individual who had filed the complaint with CCI) is aggrieved by the conduct of the OP which is alleged to be one-sided and discriminatory resulting into abuse of dominant position.

"The Informant has alleged that owing to its dominant position, OP has imposed hidden costs and onerous conditions on the buyers by way of an 'Agreement' which is extremely one-sided and biased towards OP."

The fair trade regulator has asked the probe to be completed within 60 days.
The CCI said that "considering the previous orders of the Commission and investigations carried out by the Director General (CCI's investigation arm), it appears that market for ‘provision of services for development and sale of residential units in Gurgaon’ is the relevant market in the present case.

"It may be mentioned here that the Commission has already held OP to be dominant in the above mentioned relevant market.

"Although such cases were before the Commission for the agreements which were entered into between 2007 to 2010, in the absence of any material pointing to the contrary, the Commission is of the view that vis-a-vis OP, the market dynamics have not changed much and OP still holds a dominant position in the relevant market defined above."

"It is also apparent that OP has coaxed various sums of money from the Informant at various occasions by threatening cancellation of the allotment. Further the terms of the 'Agreement' appear one-sided and depict how OP has misused its dominant position to mould the 'Agreement' in its favour."

CCI said the conduct of the company "prima facie, appears to be abusive" in terms of the relevant section of the Competition Act.

"On the basis of foregoing, the Commission is prima facie of the opinion that the conduct of OP appears to be in contravention of the provisions of section 4 of the Act. Accordingly, the Commission directs the Director General to cause an investigation into the matter and to complete the investigation within a period of 60 days from receipt of this order," it said.

CCI further said that if DG finds DLF Universal to have acted in contravention of the Competition Act, it would also probe the role of the persons who were in charge of and were responsible for the conduct of the business of the company.

"It is, however, made clear that nothing stated herein shall tantamount to an expression of final opinion on the merits of the case and the DG shall conduct the investigation without being influenced by any observations made herein," it added.

DLF and its group firms have faced regulatory scrutiny on various occasions including by CCI as also the capital markets regulator Sebi.

Announcing its quarterly results yesterday, the company said it was issued a show-cause notice by Sebi in August 2013, "hearing on which has been completed and the company has filed its written synopsis/submissions. The final order from Sebi on the said notice is awaited."

Another notice was issued to DLF by Sebi on June 25, 2013 under Disclosure and Investor Protection Guidelines, in which case Sebi last year passed an order barring the company and its top executives from the capital markets for three years.

The order was challenged by DLF before the Securities Appellate Tribunal, which has heard the case and on February 6 reserved its final judgement.

"The company and its legal advisors believe that it has not acted in contravention of law either during its initial public offer or otherwise.

"The company has full faith in the judicial process and is confident of vindication of its stand in the near future. Pending final resolution of the Appeal filed with SAT, the Company is acting in complete compliance with the said order," it said.

About other pending cases, DLF said CCI imposed a penalty of Rs 630 crore in August 2011 along with other restrictions.

In this case, the company has filed an appeal in the Supreme Court against an order dated May 19, 2014 passed by the Compat, which upheld the penalty.
The appeal is listed for final arguments tomorrow.